Tuesday, October 9, 2012

Author's religious medallion, obverse. Religious endorsement, like government endorsement of fiat currency, may replace materials or labor as scarcity indicators as long as the behavior of others supports this illusion.

Veblen mentions (I emphasize, in 1898, when Darwin's bones were scarcely dry) that scientists in the fields of psychology, anthropology, and ethnology must consider economics to be behind the times in its failure to adopt an evolutionary outlook on its problems. In 2012, we may still ask the same question of economics - why has it not become a field dominated by an evolutionary perspective? - but we must also ask what happened to the other social sciences to retard their adoption of a truly evolutionary perspective.

In their 1988 work on the evolutionary psychology of homicide, Martin Daly and Margo Wilson lament what they term the "biophobia" present in the social sciences in their day. Referring to the work of Margaret Mead in creating a myth of pure adaptability and cultural arbitrariness, they say:

What is of interest is how the myth fills a need
for social scientists and commentators. It seems to demonstrate that our social natures are pure cultural artifacts, as arbitrary as the name of the rose, and that we can therefore create any world we want, simply by changing our "socialization practices." (This may sound a remarkably totalitarian vision, but it's not, you see, because the new, improved socialization practices will be designed by nice
people with everyone's best interest at heart, and not by nasty, self-interested despots.) The social science that is used to legitimize this ideology can only be described as biophobic. [Emphasis in original.]

In 2002, Steven Pinker took up Daly & Wilson's cause in his book
The Blank Slate: The Modern Denial of Human Nature. Over a hundred years after Veblen asked why economics was so far behind the other social sciences in adopting an evolutionary perspective, Pinker was left to ask why those other social sciences, so evolutionarily modern in 1898, had dropped the thread in favor of socialization theory and other comfortable, common sense ideas Veblen might have dismissed as "spiritual stability."

Ten years later, the idea that humans have a specific, evolved nature that is unlikely to be changed by arbitrary cultural change is much more widely accepted. Critics of this theory tend to be those who do not like the implications that are drawn from it, rather than those with substantive objections to the theory itself. The most theoretical objection to evolutionary psychology is an allegation of reductionism; this, however, is misplaced.

What is beginning to be acknowledged is that just as human brains have evolved with a specific, genetically determined (though somewhat plastic) nature, items of human culture have also undergone evolutionary adaptation. (The evolution of cultural items may be seen as a special case of sexual selection: the most relevant part of the environment of adaptation is the brains and perceptions of conspecifics, within the constraints of material resources, as with
chain letters
and ships' rudders. Cultural items, like AGIs, would do well never to lose track of their base realities.) The adapted brain - not a blank slate - constrains, but does not fully specify, the kinds of cultural items that can evolve. To complicate matters more, items of evolved culture have formed a great deal of the relevant environment in which humans have biologically evolved.

Author's religious medallion, reverse.

Old Money

What would economics, the study of the production and exchange of goods (broadly defined), look like if it took a genuinely evolutionary approach to its problems?

A 2002 paper by Nick Szabo entitled "Shelling Out — The Origins of Money" is a thrilling example of how a non-reductive, biologically aware science of economics might approach problems. Szabo traces the appearance of proto-money into prehistory, concluding that the use of collectible items like shell necklaces allowed hunting, foraging groups to specialize in seasonal protein sources and exchange protein with other groups. One of the most exciting, useful observations in the paper relates to the features of proto-money. Collectible items valuable as tokens of exchange must be:

More secure from accidential loss and theft. For most of history this meant carriable on the person and easy to hide.

Harder to forge its value. An important subset of these are products that are unforgeably costly, and therefore considered valuable....

This value was more accurately approximated by simple observations or measurements. These observations would have had more reliable integrity yet have been less expensive.

Szabo especially examines the second feature: difficulty of forgery. Collectible items that necessarily involve considerable human labor and time are particularly hard to forge. He explains how this feature might have caused flints to become the first proto-money:

There are many puzzling instances of useless or at least unused flints with homo sapiens. We have mentioned the unusable flints of the Clovis people. Culiffe discusses a European Mesolithic era find of hundreds of flints, carefully crafted, but which micrograph analysis reveals were never used for cutting.

Flints were quite likely the first collectibles, preceding special-purpose collectibles like jewelry. Indeed, the first flint collectibles would have been made for their cutting utility. Their added value as a medium of wealth transfer was a fortuitous side effect that enabled the institutions described in this article to blossom. These institutions, in turn, would have motivated the manufacture of special-purpose collectibles, at first flints that need have no actual use as cutting tools, then the wide variety of other kinds of collectibles that were developed by homo sapiens sapiens. [Citations omitted.]

The features Szabo identifies are all, he says, features of the metals and coins that have functioned as money, and the reserve commodities that have backed non-fiat currencies. Further, since the advent and widespread use of fiat currency,

It is no coincidence that markets in rare objects and unique artwork — usually sharing the attributes of collectibles described above — have enjoyed a renaissance during the last century. One of our most advanced high-tech marketplaces, EBay, is centered around these objects of primordial economic qualities. The collectibles market is larger than ever, even if the fraction of our wealth invested in them is smaller than when they were crucial to evolutionary success. Collectibles both satisfy our instinctive urges and remain useful in their ancient role as a secure store of value.

Importantly, when the scarcity of items became forgeable (e.g., glass beads introduced to tribes unfamiliar with glass manufacturing), those capable of mass-manufacturing apparent costliness had a material advantage over those who had not yet adapted to detect this sort of forgery. Glass beads "were very popular wherever European colonialists encountered Neolithic or hunter-gatherer cultures," says Szabo.

Author's hand-knitted socks, made from factory-produced yarn.

Szabo's non-biophobic, evolutionarily-aware view of money, with room for both biological and cultural evolution, gives us a new way to see money. In particular, it gives us a new perspective on the labor theory of value.

Mainstream economics generally dismisses the labor theory of value as a fallacy, a cognitive bias to be eradicated (but which stubbornly, stupidly refuses eradication). This is of a piece with the similar dismissal of the consideration of sunk costs as a departure from rationality to be eradicated in rational minds.

Just as the evolutionary, game-theoretical understanding of human cognition has helped (some of) us see the point of the sunk costs "fallacy" (it helps facilitate commitment, which, like Timeless Decision Theory, though apparently irrational, improves welfare), Szabo's evolution-aware account helps us see the function of the labor theory of value: it facilitates the creation and use of hard-to-forge proto-money by inextricably connecting it to the man-hour. Prior to stationary agriculture, populations were relatively stable, and an hour of human effort required relatively stable inputs (including the care and nutrition required to raise and maintain an adult human). Agriculture increased populations, but also increased the opportunity cost of making labor-intensive, decorative items. The man-hour therefore has had a relatively stable value in real-world inputs that made it an ideal basis for proto-currency; sensitivity to this basis would benefit individuals.

Compare the two worldviews. In the mainstream economic view, the sunk costs fallacy and labor theory of value are fallacies that stubbornly resist change. To the evolutionary worldview, these "fallacies" are basic, functional realities of evolved human minds, unlikely to change, that systems must adapt to accommodate if they are to be successful.

In this latter view, mass production is a problem for consumers as well as for workers. Branding and other shenanigans have replaced genuine scarcity in markets for goods. Humans likely have an innate desire to acquire valuable, proto-money-like objects; we likely also have an innate pleasure in creating such goods. Globalization and mass production allows the lesser-valued labor of worse-off others to fulfill our needs for handmade goods, while turning the production of handmade goods into an expensive, commodified hobby for the well off.

Finally, with the advent of mass-produced food and related technologies like public education and daycare, humans themselves have become items of mass production. I have joked on Twitter that SWPLs think they are creating artisanal humans; paleo diets, along with free-range, unschooling, and the fetishization of the traditional and the offline, are ways we react to the extensive forgery of value in our cultures and ourselves. Fewer of us sing, make music, and dance; more time is spent in offices and less making shell necklaces. The welfare loss is best made apparent with an evolutionary view of economics, which might actually explain why this view has not obtained currency.

It's Full of Shells

The late Seth Roberts laid out a loopy, ambitious, and thoroughly fun theory about how we may have ended up using shells as proto-money - explaining, along the way, the evolutionary meaning of procrastination, the economic importance of gifts, and the scientific importance of decoration. "How Economics Shaped Human Nature: A Theory of Evolution" deserves to be read alongside Szabo's "Shelling Out."

15 comments:

I've seen longer lists of the attributes of commodity reserves and the funk of natural selection is always striking, like it's all been passed through a sieve.

The story you always hear is that money arises (or evolves) as a coordination solution when exchange becomes sufficiently complex. I can't imagine that it happened otherwise, but do you know if the process has ever been observed in the real word -- or duplicated in a game context?

Still puzzling over your closing line and may have a follow-up question or two once it sinks in.

Szabo's argument, as I understand it, is that it happened deep in prehistory, so that we all share whatever mental adaptations occurred to make proto-money possible. This would make it hard to observe in the real world, and would predict that any ethological findings would be negative or extremely limited.

I think the line between proto-money (shell necklaces, heirlooms, jewelry) and money is very fuzzy, and I think there are many examples of this shift from proto-money to money happening in the historical record.

The story you always hear is that money arises (or evolves) as a coordination solution when exchange becomes sufficiently complex. I can't imagine that it happened otherwise, but do you know if the process has ever been observed in the real word -- or duplicated in a game context?

I can't say this process has never been observed in the real world, but I don't know of any anthropological examples. In fact, the historical record suggests the opposite - that complex systems of credit and account evolve
before
any sort of hard currency that fits the above definitions. David Graeber's Debt: The First 5000 Years
is instructive in this regard, though it rambles more than a bit.

Szabo is talking about proto-money (shell necklaces, heirlooms, decorative flints, figurines, jewelry), not "hard currency," though the latter also fit his definitions to the extent that they are not fiat currencies. I suspect he'd agree that complex systems of credit and account evolve before actual currency, and, on a related note, that proto-money in fact entify a complex system of credit and account, as with circular gift-giving or reciprocal gift-giving societies.

I am also planning on reading that book - thanks for the recommendation!

After reading the lengthy discussions of the book on Crooked Timber and Mises, I get the impression that Graeber is perhaps fixated on debunking a somewhat dogmatic expression of the neoclassical "barter > money" model, but I don't think this necessarily discredits the notion that money comes about as a means of reckoning trade complexity; it might simply mean that the germinal coordination problems are more likely to amass in credit ledgers and chits rather than barter as initially posited.

I didn't realize Crooked Timber had covered the book. I did some quick digging and reading, and Mike Beggs's summary and critique of Graeber (http://jacobinmag.com/2012/08/debt-the-first-500-pages/) is a fair one.

The economics profession seems to be deeply committed to a worldview that is largely detached from reality. For example, economists commonly assert that supply will always meet demand, if the price of good Q (frequently but not always, oil) rises high enough.On the supply side, they ignore physical, energetic, and resource limits. On the demand side, they ignore the fact that demand destruction is often quite... destructive. Inadequate supply (especially of energy) can compromise the system's ability to increase supply regardless of demand or price for the product.

Economics is completely detached from reality. If consumption stops tomorrow and people stop believing in money and default on everything, everything will collapse and the whole structure will bare its ugly fangs. Violence would then ensue and capitalism will collapse. It would be all for the better though if that happens.

Ah, just wait till we run out of petrol. The way things are going it may well happen in my lifetime... I'm not enough of a badass to have any hope of surviving the chaos; I just hope I have enough vodka stashed at the time to find what I get to see of the show entertaining.

An economist would answer that you're misunderstanding what he was trying to say. Specifically, you're forgetting that two things happen as the price of something increases: people will try to sell more of it and they will also try to buy less of it. When the price of something becomes high enough, people eventually stop buying it, even if not buying it would literally kill them. This actually does happen in the real world; people living in extreme poverty actually do die because they don't have the money to buy food or medical care. It's a little weird to think of it this way, but poor people starving to death doesn't mean that the supply and demand for food didn't meet.

I kind of think the conclusions you draw are correct. Humans, through adaptive evolution, have come to intuitively understand a labor theory of value. It follows, I think, that for money to have currency humans must perceive it to have a value based in labor. One of the great problems of modern society is it's very easy to produce abundance with the work of relatively few people. An easy solution would seem to be for everyone to agree to just put in 10-15 hours of work a week and spend the rest of the time enjoying the abundance. But when our money is backed by nothing but the economy it is redemable in, we kind of need the protestant work ethic and folks slaving about for 50 hours a week. Otherwise we would not perceive our money as having labor value.

Work ethic! I hadn't connected it, but that's another area of interest for me. Roy Baumeister (in
Meanings of Life) argues that the work ethic - work having value for its own sake - was an innovation to replace the loss of other sources of base value, beginning a couple hundred years ago and petering out in the last century (replaced by careerism and self as sources of meaning).

An innate labor theory of value would explain why the work ethic had any success at all, especially for so long, when it seems clearly so contrary to interests.

I suspect the miserable clusterfuck we find ourselves in now is not just about fiat currency, but mostly about the massive increase in population dependent on a massive increase in complexity, shifting patterns of human life away from anything recognizable as ancestral.

The welfare cost of things like agriculture and standard time (clocks) is great; individuals are better off without them. But they promote efficiency and high population density so well that societies that adopt these miserable technologies outcompete those that don't.

The nested reply button does not seem to work. Probably my fault for using IE.

On the first point, on the meanings of life. Perhaps it is some sort of existential cruelty to be born in this time? We are the first generation fully equipped to scientifically understand life and thought (between chemistry, physics, computer science, evolutionary biology and psychology, etc.). We (well you) can even go so far as to diagnose the malaise as the loss of sacredness, and recognize the hopelessness of ever re-obtaining it once the metaperspective worm crawls in your ear.

I hope that someday people will find a way to live a sacred life while also understanding that sacredness is unscientific and largely arbitrary, and would gladly trade places with someone lucky enough to be born in that era. (Probably wouldn't go back before indoor plumbing regardless of how sacred a life one had)

On the second point, "complexity" gets thrown around a lot in the think-o-sphere and I wonder if that's what we really mean. Is the cathode ray pacifier more complex than the circus or the colluseum? It has more and smaller moving parts, but as a means of social control might it not be a bit simpler? Is internet porn more or less complicated than the means of control it supplanted?

I submit that increasing population requires increasing dependency (as in the exact opposite of independence), and that such dependency does not necessarily have to be more complicated than what it replaces. If one wants to convert a nomadic tribe of 150 into a group of 500, and have that group still be ruled by the original leaders (or their descendents), then one must construct a system of life which makes nearly everyone dependent on the system to live. In early agricultural communities the leader would own the mill and the farmers would have to trade their grain for edible flour. It does, of course, get more complex from there, but I think it kind of reaches a limit. Bread (welfare), circuses (TV), booze (still booze), etc. have all been around for thousands of years.

Venkat Rao had a post about the difference between invention and refinement. A great analogy stuck in my head. Think of the thousands of different products in the grociery store that literally are just high fructose corn syrup. As our population has increased, we've steadily moved from cooking out own food to dining on whatever color soylent sounds tasty tonight. We have become more dependent on the social system, and the system is less complicated than the one it replaced.